Fingrid will raise the grid fees - Necessitated by the extensive capital expenditure programme and rising costs
Fingrid Oyj will raise the grid fees by 30 per cent on the average at the beginning of 2012. The raises are based on the increase in the cost level of the electricity transmission business and on the company’s sizeable capital investment programme for replacing the aged parts of the transmission grid and for connecting new production capacity to the grid. In return, the reliability of electricity supply to households and industries will improve, and the key infrastructure in the Finnish society will be upgraded to a level required by the Finnish climate and energy strategy. The grid fees in Finland will continue to be relatively low on the European scale.Fingrid is making considerable capital investments in the electricity transmission system in this decade so that Finland can achieve the objectives based on its climate and energy strategy, concerning electricity production self-sufficiency, reduced carbon dioxide emissions and increased use of renewable energy. Fingrid’s goal is to ensure reliable electricity transmission in Finland in the coming years, too. Cross-border transmission facilities must also be upgraded so that electricity can flow freely in the electricity market in the Baltic Sea region from one country to another, thus enhancing the functioning of the electricity market and improving the electricity supply security in Finland.
Fingrid’s capital expenditure in 2011 totals approx. 270 million euros. There will also be considerable capital investments to strengthen the grid in the future: Fingrid is prepared to make capital investment of a total of 1,700 million euros in new transmission connections and reserve power plants in the next 10 years.
All in all, Fingrid is planning to construct almost 3,000 kilometres of transmission lines and 30 substations. The capital investment programme encompasses several major projects such as two submarine cable transmission connections and the construction of the Forssa reserve power plant. In addition to the new transmission connections, a number of substations and transmission lines originally constructed in the 1960s and 1970s will be modernised.
“The electricity market and power production patterns are changing. We are building the transmission system to conform to the needs of our customers and the Finnish society. Our customers’ new generation capacity must be connected to the grid, while at the same time it is of paramount importance to safeguard secure electricity supply and well-functioning electricity market mechanisms,” said Fingrid’s CEO Jukka Ruusunen in a press conference in Helsinki today.
Jukka Ruusunen emphasised that the increase in the grid fees is the result of many factors. The company has been communicating the upcoming pressure to increase the grid fees for several years. Alongside the large-scale capital investment programme, the market-based costs of the electricity transmission business are on the increase. Fingrid is responsible for the continuous balance between electricity production and consumption in Finland at all times. To keep up this balance, the company maintains a sufficient volume of reserves. Reserves are needed both for normal situations and potential disturbances.
“Fingrid’s grid revenue in 2011 totals approx. 220 million euros. The annual reserve power costs and reserve costs will rise by about 20 million euros from the current 30 million euros. The transmission losses in the Finnish grid are also increasing, and the resulting loss energy costs borne by Fingrid are rising to about 70 million euros over the next few years. Moreover, the company’s financial costs are expected to go up by about 20 million from the present level in the coming years.”
Gradually to the level allowed by the Energy Market Authority
The grid fees levied from Finnish industries and energy companies will increase at the beginning of 2012 by 30 per cent on the average. The change is not that significant in the price of electricity for ordinary consumers. At present grid transmission only accounts for 2 per cent of the consumers’ electricity bills and it is estimated that the consumer price of electricity for those living in a block of flats will increase about 4 euros per year and for those living in a detached house heated with electricity about 16 euros per year.
The new contract period extends over four years, but the grid fees will be reviewed annually. The structure of the grid tariff will remain essentially the same as before, but the electricity producers’ payment contribution will rise slightly.
“Fingrid’s grid fees will rise gradually to a level that corresponds to the permitted level of return derived from system operation as specified by the Energy Market Authority. In the past four years, the grid fees levied by Fingrid have been approx. 250 million euros less than the level of return permitted by the Energy Market Authority, but these reduced earnings will not be recovered in the new fees.”
Fingrid’s grid fees continue to be relatively low on the European scale.
"There are extensive ongoing grid construction projects by many other European transmission system operators, too; as an example, the grid tariffs were raised by dozens of per cents in the other Nordic countries a few years ago,” Jukka Ruusunen stated.
"There are extensive ongoing grid construction projects by many other European transmission system operators, too; as an example, the grid tariffs were raised by dozens of per cents in the other Nordic countries a few years ago,” Jukka Ruusunen stated.
Fingrid’s nation-wide transmission grid is an integral part of the power system in Finland. The nation-wide grid is the main network for electricity transmission, to which the major power plants, industrial plants and regional distribution networks are connected. Fingrid makes sure that Finland obtains electricity without disturbance.
Fingrid is arranging a seminar for its stakeholders in Helsinki today. The seminar deals with the future grid tariffs and contract structures as well as the progress of the company’s capital investment programme. The presentations given in the seminar can be viewed as a live webcasting on the Internet and afterwards as recordings.
Link to the live webcasting:
http://qsb.webcast.fi/f/fingrid/fingrid_2011_0907_kantaverkkopaiva/
http://qsb.webcast.fi/f/fingrid/fingrid_2011_0907_kantaverkkopaiva/
Further information:
Jukka Ruusunen, President & CEO, tel. +358 40 593 8428 or
Tom Pippingsköld, CFO, tel. +358 40 519 5041